UK and US regulators fine trader £3m for manipulation of oil market

A US oil trader has been hit with $4.5m (£3m) in fines and financial penalties
by British and American regulators after he admitted using a high-speed
trading programme to manipulate oil and gas markets for his own profit.

A US trader has been fined nearly £3m for manipulating oil and gas market prices

Michael Coscia, founder and sole owner of New Jersey-based Panther Energy Trading, was ordered to pay a total of $2.8 in fines and disgorgement of profits by the US Commodity and Futures Trading Commission (CFTC) and banned from trading for a year, while the UK’s Financial Conduct Authority (FCA) hit him with a £597,993 fine.

In addition, the Chicago Mercantile Exchange has imposed its own fines and penalties totalling a further $2.1m and banned Mr Coscia from trading for six months.

The fines followed an investigation by the authorities that uncovered an aggressive trading strategy used by Mr Coscia to push the prices of key commodities such as Brent in his favour.

Using a high-speed computer algorithm, Mr Coscia would execute a series of large buy and sell orders designed to push down the market price of oil or gas before then raising it so that he could sell out at a profit.

The algorithm meant the entire process took place in less than a second, generating Mr Coscia a profit of hundreds of dollars. Over a six-week trading period, he was found to have made a profit of $217,510 from trading in Brent oil market and $71,760 from WTI crude oil trading, according to the FCA. His attempt to manipulate gas oil prices was less successful and he made a loss of $9,350.

“Mr Coscia was cheating the market and other participants. High frequency trading and the use of algorithms are an important and commonplace part of the markets nowadays but in this case these techniques were deliberately designed to abuse the market, undermining its integrity,” said Tracey McDermott, head of enforcement and financial crime at the FCA.

The FCA said that at least “one significant market participant” stopped trading on the Intercontinental Exchange, one of the leading energy trading markets, as a direct result of the Mr Coscia’s market manipulation.